Archive for December, 2008
San Diego real estate sees multiple offers and above asking
December 29th, 2008 Categories: Real Estate News, San Diego County Fixer of the Week, San Diego county Real Estate News
SAN DIEGO– Sir Isacc Newton said that for every action there is a reaction and that is evident in today’s real estate market.
It’s no secret that many areas`are seeing significant reduction in housing prices and significant increases in foreclosures, which is the “action”. The “reaction”, many areas are seeing a greater number of buyers and this is creating a 2002–2005 market feel with multiple offers and sold prices coming in over the asking price.
Starting late summer, when foreclosures where really hitting the markets in high numbers, there were areas of north county that saw increase in number of homes sold as high as 300%. Some areas of Oceanside saw increases over 200% and that’s where our story takes place.
I have a first time buyer looking in the Rancho Del Oro area of Oceanside. We are primarily focusing on 3 bedrooms homes under $350,000 which there are plenty of. The real struggle for him and at times for me often comes from the perception created by the news that homes are being given away everywhere and the real estate market is lousy. Just throw out an offer as banks are begging buyers to take the homes is not an accurate portrayal.
In many areas, prices have fallen to a point where there are often many people competing for foreclosed/ bank owned homes. These are both investors who are scooping up properties now for large profits later and owner occupied buyers looking to take advantage of the low prices and interest rates. Looking back to early November for the sold homes that fit our search parameters set up for this client, there have been 24 homes sold 
in the last 45 days. Of these, 24 homes sold in the Rancho Del Oro area 20 homes sold for at asking price or over. Actually 16 homes sold for over asking and some over 10% above the asking price.
This home on 3 bedroom 2.5 bath home on Sandalwood was listed at $292,000. It was on the market for 21 days and sold for $335,000. Another example is a 4 bedroom 3 bath home on Via Isidro that was listed at $345,000 yet closed for $375,000.
Just today I spoke with an agent who has a listing in the Mira Mesa I have clients interested in. It has been on the market for 5 days, this includes the Christmas holiday period, and he has 5 offers. I truly believe this home will sale for over the asking 
price as the last sold homes were $259,000 and $279,000. He has the bank owned home listed at $222,500. It does need work, but has several upside qualities.
So, what’s the message? The real estate market is not static and resists generalities over large areas and San Diego county is a large area. Comparable home sales still matter, so you need to use them in your decision making process. When it comes down to the comparable sold homes versus headlines, the comps will win every time with the bank.
Contact me any time with question or to help with your real estate adventures. 760.415.3329
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From squatters to rental scams
December 28th, 2008 Categories: Real Estate News, San Diego County Community News, San Diego County Fixer of the Week, San Diego county Real Estate News
SAN DIEGO– With the increase in foreclosures and short sale homes, there have been numerous new, if not illegal certainly unethical, ways of cashing in on the current real estate climate.
I have written here about a couple different rental scams and ways to avoid them. One of these scams involve “landlords” that illegally gain access to house and rent it out. However, they do not rent the home more than they collect a first month and last month deposit and first month’s rent. They will only take this in cash or cashiers checks, and this should be your first red flag.
While this first scam is obliviously illegal, the next scam should be, but as far as I have heard no one is being prosecuted for it. In this scam a homeowner who has not been making house payments, rents their home out while it is in some point of the foreclosure process. The problem here is that the homeowner is not making the payment on the home and then they pocket the rent they are collecting. When the foreclosure process has run its course, the surprise and harm comes to the tenant when they are being removed from the home. Well, and to the bank.
Another last ditch effort to walk away with as much money as possible from a house being foreclosed on, is selling everything out of the house by the departing homeowner. I can not tell you how many new houses I have been in where all the appliances have been removed from. These were new construction homes, less than a 2–4 years old, that no longer have the refrigerator, microwaves, ranges, dishwashers, even built in ovens are taken out of the wall. This isn’t illegal, as the appliances came with the house, but it just does not sit well with me.
The latest scam I have heard of, as reported about on MSN, involves squatters. Seems that there is a talk going around that if you squat a foreclosed vacant home, banks are offering the squatters money to leave the property so that they do not have to go through the removal process.
Banks, in order to speed up the eviction process and avoid legal action, are paying these occupants as much as several thousand dollars to get them out quickly, a strategy known as “cash for keys.”
This practice, real-estate agents and law enforcement officials say, has encouraged all kinds of ne’er-do-wells to break into vacant foreclosure properties in hopes of earning a little extra cash.
“They get a place to live for a couple of months rent-free and the banks will give them a couple thousand in moving expenses,” Wood says.
Some are pulling this scam repeatedly in a number of properties once they find out which lenders are paying.
If someone knows, for instance, that a particular lender is paying $3,000 for people to move out of their vacant properties, Roberts says, they have more incentive to target several of its properties for squatting.
“It’s like they’re letting people walk into the vault and take money,” Roberts says.
Often, the same real-estate firm or lender keeps the same code for its lockboxes, making it easier for trespassers to move in once they get a code or combination.-www.realestate.msn.com
I was curious why the combo boxes used by real estate agents representing REO companies are often times the same code used on numerous properties. I asked an agent once about this and they told me it was a requirement of the lender. It did not seem smart to me then and still doesn’t.
If you have any foreclosed homes in your neighborhood, keep an eye on them. If you see any suspicious activity call the realtor, if there is a sign. If there is not a real estate sign the asset management company should have its contact info taped to several windows which you could use and as always you should call your local police. There are many more tips on this and avoiding rental scams here.
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The winner is…. First time home buyers
December 27th, 2008 Categories: Real Estate News, San Diego county Real Estate News
SAN DIEGO– Today on MSN they had an presentation on the winners and losers of the 2008 real estate market. Me, I am a loser. The #3 winner according to their presentation, first time home buyers and the good news is here in San Diego.
In many parts of California, Florida, Arizona and Nevada, sales are starting to pick up as buyers begin to think they are near the bottom of the market.
The huge swell of foreclosure properties and short sales, coupled with fixed mortgage rates dipping under 6%, is providing some first-time home buyers who have sat on the sideline for years their first real shot at a house.
“The typical price of what’s being sold is anywhere from 22% to 35% below what the (median) home is selling for,” says Steve Murray, real-estate consultant and editor of the Real Trends newsletter. “People are buying homes out there; they are just buying considerably lower-priced homes.”
For those with good credit and some money to put down, credit is available, brokers say, and there is no end of choices — something that was missing during the last real-estate boom-Realestate.msn.com, 12/26/2008
It does seem that the message is getting out. With interest rates now under 5% in many cases and area home prices at price points not seen in many years, Bloomberg.com reports that San Diego November home sales almost doubled. 
I am currently actively working with several first time home buyers and in many areas there are some great homes at prices I did not think we would see again.
If I can help you with your decision making process or home search feel free to contact me at 760.415.3329.
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Happy Holidays!!!
December 26th, 2008 Categories: Real Estate News
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San Diego mortgage rates already approach 4.5%
December 18th, 2008 Categories: Real Estate News, San Diego County Fixer of the Week, San Diego county Real Estate News
SAN DIEGO– In working with clients this past couple weeks I have seen 
mortgage rates as low as 4.65% with a half point for FHA and conventional loans. Additionally, a neighbor is refinancing at 4.5% through BofA, though I have to say I am taking their word on this.
This morning it was reported by the Associated Press that mortgage rates have hit a 37 year low according to Freddie Mac’s weekly mortgage survey. While this is great news for some, especially new buyers, it isn’t much help for those already facing mortgage problems or who are upside down because of the requirements to qualify.
Additionally, my favorite financial blog, Seeking Alpha, reported that the Treasury is interested in a plan that would provide government funded 30 year mortgages to 4.5% for purchases.
The Federal Reserve has already stated its intention to buy $600bn (€449bn, £401bn) of Fannie and Freddie securities and is interested in doing more. Meanwhile, support is building for a plan to offer government-funded 4.5 per cent mortgages for new home purchases that would be sold by banks, securitised by the mortgage giants and sold on to the government.
This proposal – based on an idea by Glenn Hubbard and Christopher Mayer, professors at Columbia University – is being considered by Hank Paulson’s Treasury. Tim Geithner and Lawrence Summers, the president-elect’s economic chiefs, also appear interested.
Mr Paulson may launch a version of the plan, offering 4.5 per cent mortgages for new purchases as a final hurrah before leaving office. [Emph. added]– Seeking Alpha, 12/17/2008
However, Treasury Secretary Paulson, went on record denying rumors that the idea in being “contemplated” by the Treasury.
So what does this all mean?
This is a GREAT time to refinance but you have to be one of the few that not only has maintained a high credit rating BUT also has equity in their home. The real benefactors of the current mortgage market climate are HOME BUYERS. With housing affordability at a recent high and mortgage rates already approaching the 4.5 % goal, this just may be that opportunity you have been waiting for.
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San Diego housing affordability up over 800%
December 17th, 2008 Categories: Real Estate News, San Diego County Community News, San Diego county Real Estate News
SAN DIEGO– True story. San Diego housing prices continue to fall, unemployment continues to rise, more industries are lining up for the bailout money, new rescue programs and strategies are discussed and implemented, but underneath all of that; SAN DIEGO HOUSING AFFORDABILITY RATE HAS RISEN OVER 800%!!!
Yes, amongst all the bad news, sub 5% interest rates on conventional fixed loans and San Diego’s increasing housing affordability rate are the flip side of our negative economic coin and the welcome mat into the housing market for buyers.
When local housing price peaked in late 2005, the affordability index was at an all time low of less than 4%. However, as regional housing prices have been on their downward spiral, the affordability rate has been on the up escalator and was just over 31% in the second quarter of 2008. During the second quarter, the average home price was $342,000. Recent third quarter numbers showed our local housing prices continued down and stand near $272,000. This should translate into approximately a 4% increase in affordability.
FORCLOSURES AND SHORT SALES
“Bargains and bargain hunters have kept this market alive through some of the bleakest financial news in memory,” DataQuick President John Walsh said in a statement accompanying the figures.
“There’s this renewed sense that you can score a ‘deal’ – something that had been missing for many years. Last month’s Southland sales weren’t great, given they were the second lowest for any November in 16 years. But they could have been a lot worse.” -San Diego Union Tribune, 12/17/2008
Unfortunately for existing homeowners, foreclosures are the number one home sold and the primary mover of the pricing decline. For buyers, and buyers and sellers are usually at odds, foreclosures are your friend and the driver of our positive housing affordability rates. Additionally, while foreclosures and short sale transactions have been the prominent resale home in the recent past, the number of foreclosure homes sold climbed past 50% of the total number of homes sold for the first time in San Diego market history and set the mark at 52%.
While I can see this record number, 52%, challenged as a percentage of sales, I do not think we will see an increase in the number of foreclosures coming on the market in the near future and should therefore see a reduction in the actual number of homes sold. Because of this, taking a wait and see position may not be in your best interests if you are considering buying a home. Why I am suggesting this is not industry insider prodding, it is based on, the fact that most of the major lenders announced a moratorium on foreclosure proceedings last month. Because of this, the pipeline of these homes should slow down significantly as this provides free living arrangements for the homeowner who has already not been paying their mortgage. Would you go through the inconvenience of a short sale or 
move if you did not have to? I doubt they will either.
Now this is in no way an indicator of my belief that the foreclosure tide is on it’s way out, only that there should be a temporary reduction in the numbers coming on the market in the next 90 to 120 days. However, if the banks and the FED use this time wisely, we may actually see some real progress in the number of loan modifications and better use of the “bailout” money. This in turn could hopefully produce some positive measure of impact on the housing market for all and may actually permanently reduce the number of distressed home lisintgs.
If you have any questions, I can be reached at 760–415–3329 or brianalong@msn.com.
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Where’s the bottom?
December 16th, 2008 Categories: Real Estate News, San Diego county Real Estate News
SAN DIEGO– Not sure how many of you saw this on 60 Minutes over the weekend, but it is worth watching. While the “meat” of the story focuses on Florida and specifically, Miami/Dade county, there will obliviously be some impact locally.
What could potentially help this from coming to fruition, not that it is set in stone that it will happen, is a better use of the tools given to turnaround our housing market and the economy. Additionally, the government needs to be forward thinking in how to implement new strategies. Currently they are trying to battle in the present and the government can not react fast enough, so the programs end up being non–effective almost before they start.
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When loan modifications don’t work
December 14th, 2008 Categories: Real Estate News, San Diego county Real Estate News
SAN DIEGO– I have written many blog posts urging homeowners to consider and investigate loan modification. Each time I wrote about this, I truly believed this to be a viable option for homeowners who were in trouble of losing their homes. Unfortunately, with each new program that was introduced, there seemed to be “requirements” that prevented the program from being an effective option or even entice borrowers to apply. Some of these requirements were background checks, having to have already missed a defined number of payments or, probably the worst one, making the new modified loan a fully amortized which actually increased the payment.
Here is one example from an article in the Columbus Dispatch on 12/14/2008 that shows how a modified payment can actually be more than the original payment, yet the interest rate is lower.
She and her husband were one of a half dozen people who last week sought help from Mark Easterling, a housing counselor with Homes on the Hill on the West Side.
Counselors act as advocates for struggling homeowners. They help sort out finances and deal with lenders.
The Reynoldsburg couple ended up in Easterling’s office after the woman lost her job last month. The couple, now a month behind on their $1,237 monthly payment, didn’t want their names used because they are embarrassed that after seven years, they can’t afford their house payment.
They were hoping to lower their payment but ended up agreeing to an extra $155 a month to catch up for the missed month. After 12 months, the couple will have repaid the lender $2,237 for a $1,237 skipped payment.
The couple, with two children ages 10 and 11, said they will cut their monthly grocery bill from $400 to $300 and eliminate cable TV while the woman looks for another job.
They came to Easterling looking for a lower payment and left with a bigger one.
Another reason payment for an increasing payment on some loan modifications is due to the borrower having to accept an amortized loan versus another interest only loan that were so popular. A $400,000 loan at 6% interest only equals a loan payment of $2000 a month. If you modified your loan to 5% but amortized, the payment would INCREASE to $2148.00.
I try hard to keep track of these programs and it has been no real surprise to me that very few people have actually worked out new loans. According to a New York Times article dated December 12, 2008, a program designed 
to help 65,000 borrowers of the now defunct IndyMac mortgage holders has only benefited 7,200. However that would be considered remarkable results when compared to the 300 billion dollar program congress approved to help 400,000 borrowers. Because of the requirements of this program, only 200 people have applied for the program and NO loans have been modified.
But there have been loans modified by banks yet unfortunately, what is currently being done does not seem to be always helping. According to data from the office of the Comptroller of Currency, more than half of the loans modified in the first six months of 2008 were delinquent within six months.
“After three months, nearly 36 percent of the borrowers had re-defaulted by being more than 30 days past due. After six months, the rate was nearly 53 percent, and after eight months, 58 percent,” the Comptroller said in remarks at the Office of Thrift Supervision’s National Housing Forum today.
But it’s not just the requirements and loan modifications presented by the bank that are the sole cause of this trend. As noted on Seeking Alpha, Farah Jiminez, executive director of Mt. Airy USA, the community development corporation sums up a credit truth best.
“There are individuals for whom any loan modification would result in a mortgage payment they can’t afford, because they couldn’t really afford the original mortgage in the first place,”
So what’s a homeowner to do? If you are truly struggling with your mortgage you should, need to, still investigate the possibilities of loan restructuring. As more news comes out showing that the loan modifications are not working and the consumer gets more educated there will most likely be better deals written. Remember, this is your home and if you would like to keep it, be smart, be persistent and seek help.
Additionally, if you do not feel comfortable with what’s being presented or you feel that you can negotiate a better deal, DO NOT SIGN the agreement!! Seek counsel with someone you trust to look out for you or personally go back to the table and negotiate harder. At the end of the day the bank DOES NOT want to foreclose on your home. This is your best tool during negotiation, so do not be afraid to use the F-word as often as necessary!!
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BIG change to capital gains exemption for San Diego real estate
December 7th, 2008 Categories: Real Estate News, San Diego county Real Estate News, Triathlon Club of San Diego Race Reports
SAN DIEGO– Yesterday at the Triathlon Club of San Diego duathlon in Carlsbad, I was approached by a fellow club member with a real estate 
question. His question pertained to a new tax law effecting the capital gains tax exemption when moving back in to a second home thus making it a primary residence under tax law.
See in the past, a home that you owned and lived in for a 2 year period, not needing to be consecutive, out of the last five years was looked upon as a primary residence. This allowed single people to write off up to $250,000 in capital gains and married couple, there is a time requirement and parameters for the marriage, to write off up to $500,000.
Now granted in most areas of the country it could take a homeowner many years, if ever to max out this deduction, but here in San Diego it was very doable in the period of 2001 to late 2006 early 2007.
Being the clever people that we are, many realized that this was a perfect time to unload that vacation or rental property and walk away with a nice junk of changes. What would happen, is that the owner would rent out the home they wanted to keep, move into the second property, live in it for about 20 months, put it on the market making sure escrow closed after the two year requirement and BINGO, exemption on gains. They would then move back in to their initial home and live happily ever after. Or, there were those that parked the gains from the second home, waited two 
years to sell the first home, pocketed the gains from that home and bought the house on the beach with the proceeds from the two or more sold homes. This gave them a lot of cash and worked within the tax laws.
Well, congress saw this as taking advantage of a loophole and closed this with an overlooked provision on page 690 of the 694 page 2008 Housing and Economic Recovery Act. To be honest with you, until my fellow club member brought this up, I had not heard of this change. See I, like many others, were focusing on what the act contained dealing with FHA loan limits, one of the initial mortgage bailout plans and money that was to be dispersed to cities to help maintain foreclosed properties avoiding blighted neighborhoods. After all, foreclosures and short sales rule the day right now.
So what does page 690 change? Well this is a bit unclear as I write this because again it has been a bit overlooked. It is one of the few things regarding our current real estate climate where you have to drill down on GOOGLE searches to come up with anything, but here is the very important overview.
Starting on January 1, 2009 the gains will be prorated. What I have not been able to yet confirm is if the law is retro or that 1/1/2009 is the start date. I believe the proration will start from that date meaning if you were to move into your rental property on 12/31/2008, sold it for a $350,000 gain as a married couple on 1/2/2010, you would see the exemption for the entire $350,000. Under the other scenario, say you owned the house as a rental for exactly 5 years from 12/31/2008 and followed the same parameters as above, you would owe gains tax on approximately $250,000 as this would be the proration of 5 years as a rental out of a 7 year ownership period. Either way, which I will keep working towards the answer on so check back, the proration of your gains will be the case going forward.This law will apply towards vacation homes also.
Why this is so important? Besides the fact that you could lose many thousands of dollars, if you had this built in to your retirement strategy you need to reexamine your strategy due to the new tax implications. You may want to move back into that home as close to 1/1/2009 as possible and 
live there for the two years to maximize your value. This would be especially true if you have long term plans for the home your in now. The longer you live there the less impact the new law will have, because remember, when you move out of that one, it will become a second home and fall under these guidelines. But if it is two years out of the next 20, this is not too bad.
You can always use the 1031 exchange method to sell rental property in order to avoid gains, but this just moves your proceeds in to another property. The beauty of the old law was that it gave you a way to convert that investment back to cash.
If you have any questions please seek advice from your tax preparer or financial planner.
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